Australia should 'pay for success' in tackling homelessness

New programs for the homeless link taxpayer funding to outcomes, making service providers more accountable for the impacts their programs have on those they seek to serve, writes Matthew Tyler.

As Homelessness Week draws to a close, I've been reflecting on Pink Floyd's epic ballad from 30 years ago: "No more turning away from the weak and the weary."

Following brave protests across the country, homelessness has made an overdue ascent on the political agenda with additional funding in several states, including Victoria, New South Wales, and South Australia. But we've seen short-term cash splashes before. So what makes this time different? Three words: Pay For Success.

Currently, state governments pay social service providers based on activities. These include providing shelter beds, serving meals or seeing patients. While these services are critical, funding is not tied to sustainable improvements in people's lives. The result is a seemingly unrelenting need for short-term reactionary support.

In contrast, Pay For Success means government funding is tied to measureable life outcomes. Examples of outcomes from existing projects include reductions in reoffending following release from prison, entry into sustained employment and family reunification for children in state care. If the agreed outcomes are not delivered, then taxpayers do not pay.

Pay For Success projects are funded by the shelters that will never be built, the jails that will never be filled and the emergency rooms that will never be occupied.

To be clear, Pay for Success is not privatisation as some have claimed. Service providers from the not-for-profit sector will continue to deliver programs. In some projects, investors and philanthropy bear the risk of project failure by providing upfront funding. This arrangement means funds are available to deliver services whilst the government can delay payment until outcomes are observed.

Pay For Success fulfils a base expectation citizens have of government: our tax dollars are put to good use. Linking funding to outcomes means service providers are more accountable for the impacts their programs have on those they seek to serve. Governments also take a more rigorous approach. Evidence is more thoroughly understood prior to launch, programs are better targeted and program impact is monitored more closely.

In the US, Pay For Success has been widely used to support preventative measures that reduce homelessness. I've had the opportunity to work for Salt Lake County, a world leader in supporting those experiencing chronic homelessness. They are planning a Pay For Success project that will fund Rapid Rehousing to prevent those who have become recently homeless from becoming chronically homeless. Participants receive approximately 4.5 months of private rental subsidy combined with holistic services. The County pays only if participants make a sustained transition to self-sufficiency in the private rental market.

The US is of course different to Australia, although the principles of public policy and social science traverse borders. Namely, prevention is better than cure and incentives change behaviour.

Pay For Success projects are funded by the shelters that will never be built, the jails that will never be filled and the emergency rooms that will never be occupied.

Ensuring a better life for homeless people can also help future government budgets. The Council to Homeless Persons estimates that each person living on our streets costs taxpayers $12,000 per year. Yet it is politically and practically difficult to shift remedial expenditure towards prevention. Pay For Success promotes this transition by reassuring taxpayers that preventative expenditure will only take place if the program works.

With the appropriate resources to build capacity, Pay For Success is in the interests of high performing service providers too. No single intervention will be a silver bullet. However, the focus on outcomes means the best programs can be identified and ultimately scaled.

The theme for this year's Homelessness Week is "Homelessness Counts". Let's put our money where it counts too. Einstein's definition of insanity is doing the same thing over and over again whilst expecting a different result. Pay For Success offers an alternative to the status quo. This change in mindset will foster the building blocks for a high performing, more collaborative and prevention focussed social sector.

Returning to the words of Pink Floyd, "It's not enough just to stand and stare; is it only a dream that there'll be no more turning away?"

Matthew Tyler is an economist studying for a masters of public policy at Harvard University where he is being supported by the Menzies Foundation. He has worked on Pay For Success in Australia and the United States including on programs addressing homelessness. He is also a former adviser to the Federal Labor Party. He tweets at @Matt_B_Tyler.